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Economy and Infrastructure

12.06.13

6% pay cuts for British workers

British workers have had their wages hit hard to keep their jobs, new research from the Institute of Fiscal Studies (IFS) shows.

Over the last five years, workers saw pay cuts of 6% in real terms. Historically wages rise by about 2% a year, meaning people are around 15% worse off than they would have been if wage trends before the economic crisis had continued.

Claire Crawford, programme director at the IFS said: “The falls in nominal wages that workers have experienced during this recession are unprecedented, and seem to provide at least a partial explanation for why unemployment has risen less – and productivity has fallen more – than might otherwise have been expected.

“To the extent that it is better for individuals to stay in work, albeit with lower wages, than to become unemployed, the long-term consequences of this recession in terms of labour market performance may be less severe than following the high unemployment recessions of the 1980s and 1990s.”

A Treasury spokesman said: “As the IFS says, the UK is recovering from the 'longest and deepest' recession in a century. Despite this, the labour market has remained strong: one-and-a-quarter-million private sector jobs have been created and more people are in private sector employment than ever before.”

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